Do we have a crisis now?

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BBM got it wrong for the last three weeks. Denying the crisis exists reduces his credibility when it becomes full blown. Admitting we have a problem gives him the opportunity to galvanize the people into a whole-of-nation approach in addressing it.

True, most of our gas stations are still open and still selling gasoline and diesel at higher prices. But the way the situation in the Middle East is evolving suggests that fuel shortage is inevitable even if the war ends today.

Indeed, several Middle Eastern oil producing countries significantly reduced or stopped pumping out their oil and gas fields as onshore storage facilities hit maximum capacity and tankers remained unable to export through the Strait.

The crisis became officially serious after BBM told Bloomberg that grounding planes is a “distinct possibility.”

“Several countries have already told our airlines they cannot fuel their aircraft, so they have to carry fuel there and back.”

Even as BBM’s spokesperson is still saying there is no crisis, BBM has declared a state of energy emergency. His Executive Order noted:

“The Secretary of Energy has determined that circumstances pose an imminent danger of a critically low energy supply and that urgent measures are necessary to ensure the stability and adequacy of the country’s energy supply.”

That sounds like a crisis. Coming from BBM, it may be a bit confusing but it is good news… nagising siya.

Unfortunately for BBM, his energy officials are not too conversant with nuances and technical aspects of the oil markets. From the Senate hearings, we get the impression that their 45-50 days inventory level is their best guess or on the say so of oil companies rather than based on hard statistics.

They should have been regularly collecting data from Customs on every shipment of the oil companies in terms of quantity and where it came from. Then they will have useful solid data for a time like now.

Without data, DOE didn’t realize it was allowing the country to be almost totally dependent on the Middle East for supply of crude and petroleum products. That’s mission failure.

They should have negotiated government-to-government contingency supply agreements from outside the Middle East to backstop the commercial suppliers of the oil companies.

As I have been pointing out in this column, it is bad our government has no contingency plans to respond to an oil supply disruption. Hormuz was top of mind in the old energy ministry. The current DOE probably only heard of Hormuz now.

We have no strategic oil reserves to speak of. And the government is now scrounging around the world for anyone who would sell us enough supply until Hormuz is fully open again.

I am told that there is available supply through the black market from refineries in China and India among others. But very expensive. And even this may disappear if Hormuz remains blocked.

Here’s the other problem. Even if Hormuz is unblocked today, it will still take months to normalize global oil flows.

First, there is a massive shipping backlog. Clearing this backlog is expected to take several weeks once traffic resumes.

Then the Asian refineries that were forced to shut down due to lack of feedstock cannot return to full capacity instantly. It takes one to two weeks for a refinery to turn around to reach full output after a shutdown.

Then there are oil wells and upstream facilities that were shut down after they ran out of storage tanks. It may take weeks or even months to return to pre-crisis production levels.

It also takes time to bring damaged production and refinery equipment back online.

It is a mess. A public information campaign to encourage energy conservation should have been launched two weeks ago at the latest.

Mandate pandemic-style work-from-home to significantly reduce oil consumption from commuting. This is what our workers in our BPO industry want anyway. Given our traffic, the savings on gasoline consumption will be significant.

Encourage the use of public transport to reduce the use of gasoline and diesel for cars. But our public transport system is horrible.

At the very least, more train capacity must be added to MRT and LRT routes to accommodate an increase in passenger volume. Force Sumitomo to allow the use of Dalian trains to increase the passenger capacity of MRT3.

The P1,500 assistance being given to PU drivers is insultingly too little to cover the extremely substantial rise in diesel prices. Allowing a fare increase is essential to keep them driving.

Increasing the number of carless days to two based on a car’s number plate could reduce traffic congestion, engine idling and fuel-intensive stop-and-go driving.

Our LPG supply is precariously low. Using electricity or other fuels to cook will help stretch supply.

With the decline in Malampaya production, the Luzon power grid is increasingly using imported LNG. That’s now very expensive and difficult to source after Qatar’s LNG export facility was bombed. If this oil crisis sticks long enough, even our electricity supply will be affected.

We must assume that oil supply may be difficult to get at any price in the next few months.

The government should eventually invest in a strategic oil storage system, build crude and product storage tanks in Bataan and product tanks in key regional centers. If we can afford P1 trillion in flood control scams, we can afford to have this fuel reserve.

Last Tuesday, Petron received the first shipment of Russian crude oil of roughly 750,000 barrels. Petron has processed Russian crude before the Ukraine crisis. Petron plans to process more diesel from this crude oil shipment. It is in discussions to procure more deliveries from a Russian Pacific port.

It took BBM a while to recognize a crisis but better late than later. Now he must show leadership in managing it.

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco